Chinese lithium carbonate prices dropped to 166,500 yuan ($22,814) per tonne last Wednesday. It represents an almost 50% decline from its latest peak price in early June, as per Bloomberg.
In hindsight, the metal’s pricing per tonne set a record of 598,000 yuan. Considering the significant price decline, it is now on track to hit its lowest pricing level in two years.
Market changes
The report noted that Chinese lithium demand usually increases in the fourth quarter of the year due to large-scale battery cell manufacturing and deployment.
In addition, battery manufacturers typically reload their feedstock before that. Alarmingly, the Chinese lithium demand did not improve this year as expected.
As per Rystad Energy analyst Susan Zou, manufacturers’ feedstock replenishment has yet to occur because they still have a lot of inventory to empty.
Moreover, the declining demand also prompts car and battery companies to strictly manage their stocks.
“Car and battery manufacturers have been cautious when it comes to restocking.”
Wanyi Shao, Guotai Junan Futures Co. analyst
Western movements
Mining Technology noted that the decline in Chinese lithium carbonate price is partly due to Western concerns over its dominance in the global lithium industry.
For instance, the US implemented the Inflation Reduction Act to significantly cut its reliance on China for such products.
The IRA incentivizes electric automakers and battery makers to invest in local production using domestically sourced materials or from authorized trade partners.
Outlook
Chinese automakers are losing their share in their home market due to economic uncertainty. According to Counterpoint Research, their electric vehicle sales increase stalled to 37% YoY in Q2 2023. In contrast, its global average is 50%.
That said, Goldman Sachs Group analysts, including Aditi Rai, forecast in a September 21 note that Chinese lithium carbonate prices will keep declining in the next 12 months.
“For the rest of the year, the fundamental focus appears to be on a seasonal uptick in Chinese EV sales, and we think any disappointment relative to historical norms could put accelerated downward pressure on prices.”
Goldman Sachs Group analysts
See Also:
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Nonetheless, the ongoing price decline in Chinese lithium carbonate enables an ideal buying prospect for the metal. The expected surge in demand in the next ten years will certainly aid prices in the long term, as noted by Wilsons Advisory.
The increasing adoption of electric vehicles will improve the demand for critical minerals, potentially establishing a healthy pricing balance.
